A very expensive lesson that I learnt through my investing journey! By not having a proper investment strategy when I buy in this stock. I bought in George Kent (Gkent) on 27th March 2017 when Gkent was traded at RM3.78/share. During that time, I just followed tips given by a famous stock guru, without researching on the company background and it was one of the best bullish stock in 2017.
After the change of government happened back in 2018, stock price fell like no tomorrow, just within a day of limit down, my portfolio from profit turned into loss. However, I thought it was a panic sell down on the unstable politics in our country and I topped up on this stock, not believing it will have any impact to Gkent financial status.
After few quarters of monitoring, Gkent's existing projects were affected and cancelled as what we all know. I looked back the guru for help and most hilarious part was the guru had sold the stock without informing his members. And this is a lesson that I learnt, the biggest mistake i made was relying on someone else to advise me what to do on my own money. At the time of writing, I still holding some amount of this counter and having serious loss that not worth to cut loss anymore.
Now, let's look into the latest quarter report, Q4 of FY20.
Revenue reported RM 82.4mil was 28.6% lower compared to preceding year corresponding quarter of RM 115.4mil. No dividend was declared during Q4 compared to 3.5sen of dividend per share proposed by management in Q4 FY19.
The Group's current quarter profit before tax of RM10.36 million (31 January 2019: RM37.58 million) was 72% lower. The lower profit before tax reported was mainly attributed to lower contribution from the Engineering division. Other gains/(losses) mainly arose from unrealised loss on foreign exchange of RM1.94 million (31 January 2019: RM0.68 million) on foreign currencies held.
Revenue for engineering segment of RM52.10 million for Q4 FY20 was 35% lower as compared to RM80.53 million for the corresponding quarter in 2019. Segment profit of RM12.58 million for Q4 FY20 was 69% lower as compared to RM40.30 million for the corresponding quarter in 2019. The lower segment profit was mainly contributed by the lower revenue and gross profit margin in the current quarter.
Revenue for metering of RM30.29 million for Q4 FY20 was 13% lower compared to
RM34.86 million for the corresponding quarter in 2019. Segment profit of RM5.88 million for Q4 FY20 was slightly higher as compared to RM5.60 million for the corresponding
quarter in 2019.
The group is having net cash position, after deducting all loans and borrowings, Gkent is still holding RM176mil of net cash. I believe the strong cash holding may offer support to the share price through continuous share buy back and sustaining its business operation.
Shareholder equity was improved slightly about 1.7% compared to preceding year. I believe the share value is still there, RM 0.32/share of net cash value.
Ongoing project lists and outstanding order book
Outstanding project lists (Not up to date) from Gkent's official website.
There are remaining 4 major projects under construction. LRT 3 project construction work is taken care under its JV company 50:50 with MRCB. Therefore, LRT 3 project is not recognized in revenue. Same goes to MRT 2 track works where the work package worth of RM1.01bil was awarded to CCCC and Gkent JV on a 51:49 basis. The remaining projects showing in the group's revenue segment are both hospital construction projects and some variation orders from LRT 2 project.
Outstanding order book reported by RHB investment.
Q4 Company prospects
Comment:
The coming FY21 will have negative impact on its financial performance due to extension of MCO and slower construction progress and manufacturing due to restriction in work force. From engineering segment, the balance outstanding order book that will reflect in revenue is around RM 245mil mainly contributed from two hospital projects that schedule to complete in FY21, by referring to the info written in RHB investment research report.
Engineering profit margin has reduced from 38% in FY19 to 26% in FY20. I believe that the profit margin may remain stable at around 20-25% in FY21. The net profit contribution from engineering segment for FY21 would be around RM 56.3mil.
For metering segment, after the changed on secured project status, the group is now focusing back its core business to expand its metering business and reducing material cost. However, the metering profit margin was affected by fluctuation in foreign currency. In near term, I anticipate that USD will remain strong vs RM and lower demand from other countries due to covid-19 pandemic. Hence, metering segment could see lower net profit for FY21 by 5% to RM20mil.
The overall forecast net profit for FY21 to be around RM34.9mil after considering 16% higher operating cost during MCO and taxes expenses. Forecast EPS for FY21 should be 6.49sen.
Taking PE of 8, the Target Price is around RM0.52/share.
RHB investment gave a sell call on Gkent. I believe in near term, Gkent will remain in bearish trend unless the management is able to secure new projects to increase its order book or having new smart metering orders. Gkent is now standing at RM0.32/share net cash position.
No comments:
Post a Comment